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Fitch affirms county utility system revenues at 'A-'; outlook stable

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Fitch Ratings affirms the 'A-' rating on Los Alamos (the Utility) approximately $47 million utility system revenue bonds, series 2004 and 2006. The Rating Outlook on all bonds is Stable.

RATING RATIONALE:

--Stable Financial Performance: The combined utility continues to generate healthy profit margins averaging 7.2% since fiscal 2006, and reported low system leverage (4.8 times [x] debt-to-funds available for debt service [FADS]), adequate debt service coverage (1.42x) and healthy liquidity (125 days cash on hand [DCOH]) in 2010;

--Customer Concentration Risk: Credit risks include a high customer concentration risk. The Los Alamos National Laboratory (LANL) accounts for over 53% of the operating revenues. However, this is partly mitigated by the relative stability exhibited by LANL over the past few years and the lab's importance to U.S. national security.

--Manageable Capital Program: The combined system has a 10-year capital program sized at a manageable $97 million. Electric system projects will be funded 80% by the Department of Energy (DOE) and the remaining 20% will be financed through incremental utility rate increases. Water and sewer projects will be financed with a mix of state grants/loans, utility rates and county participation;


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